Stenback manufactures coffee mugs that it sells to other companies for customizing with their own logos. Stenback prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month: Direct Materials (0.2 lbs @ $0.25 per lb) $0.05 Direct Labor (3 minutes @ $0.10 per minute) 0.30 Manufacturing Overhead: Variable (3 minutes @ $0.06 per minute) $0.18 Fixed (3 minutes @ $0.13 per minute) 0.39 0.57 Total Cost per Coffee Mug $0.92 a.There were no beginning or ending inventory balances. All expenditures were on account. b.Actual production and sales were 62,900 coffee mugs. c. Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17 per lb. d. Actual direct labor usage was 202,000 minutes at a total cost of $24,240. e. Actual overhead cost was $10,100 variable and $30,800 fixed. f. Selling and administrative costs were $131,000. Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U). 1) Direct materials efficiency variance =(AQ - SQ) × SC = Direct labor efficiency variance = (AQ - SQ) × SC = Now, journalize the usage of direct materials, including the related variance.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead

Section: Chapter Questions

Problem 20P: Jillian Manufacturing Inc. manufactures a single product and uses a standard cost system. The...

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Stenback manufactures coffee mugs that it sells to other companies for customizing with their own logos. Stenback prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month:

Direct Materials (0.2 lbs @ $0.25 per lb) $0.05

Direct Labor (3 minutes @ $0.10 per minute) 0.30

Manufacturing Overhead:

Variable (3 minutes @ $0.06 per minute) $0.18

Fixed (3 minutes @ $0.13 per minute)

0.39

0.57

Total Cost per Coffee Mug

$0.92

a.There were no beginning or ending inventory balances. All expenditures were on account.

b.Actual production and sales were 62,900 coffee mugs.

c. Actual direct materials usage was 10,000 lbs. at an actual cost of $0.17

per lb.

d. Actual direct labor usage was 202,000 minutes at a total cost of $24,240.

e. Actual overhead cost was $10,100 variable and $30,800 fixed.

f. Selling and administrative costs were $131,000.

Select the required formulas, compute the efficiency variances for direct materials and direct labor, and identify whether each variance is favorable (F) or unfavorable (U).

Direct materials efficiency variance

=(AQ - SQ) × SC =

Direct labor efficiency variance

(AQ - SQ) × SC =

Now, journalize the usage of direct materials, including the related variance.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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